Dear Subscriber, Please find below today's update which gives you an insight into the current market conditions, enabling you to keep informed and up to date on the latest currency movements. Headlines • UK Industrial Production excels in June – all 13 Manufacturing categories grow.
• UK GDP up 0.7% – House Prices & Car Sales impress.
• Euro up on strong German Factory Orders – Italian GDP half-as-bad as forecast.
• RBA rate cut boosts AUD – rhetoric more optimistic than previous statements. Sterling The Pound perked up again yesterday as more positive domestic releases pointed towards a broad-based economic recovery in the UK. The limelight fell on the UK Industrial Production Sector as output rose by 1.1% during the month of June, smashing forecasts for a more subdued improvement of 0.6%. The encouraging report shows that all 13 categories of the British Manufacturing Industry expanded in June – the first month of all-around growth since 1992. It was also reported that Manufacturing Production nearly doubled predictions of 1.0% in June with a robust reading of 1.9%. During the afternoon the National Institute of Economic and Social Research announced that the British economy grew by 0.7% in the three months ending in July, thanks to surges in consumer spending. The optimistic reading suggests that UK GDP is maintaining its upward bias in 2013. Sterling also benefitted from a 4.6% rise in UK House Prices, a 12.7% jump in UK Car Sales and a 3.9% acceleration in BRC Retail Sales ahead of this morning’s crucial Bank of England Quarterly Inflation report. It is possible that GBP gains will increase if the BoE strikes an optimistic tone, but if the UK Central Bank opts for enhanced monetary support there is a strong possibility that the Pound will give back some of its recent gains against the majors. Euro Sterling's rally against the Euro lost some steam at around midday yesterday as better-than-expected German and Italian data reflected positively on the currency bloc. Although the Italian 2-year recession was made official with the latest in a long run of negative quarterly GDP results, the -0.2% second quarter print was half-as-bad as analysts had predicted and showed a decent improvement upon Q1’s -0.6% contraction. If the Italian government can abstain from fresh elections, amid the latest Berlusconi scandal, then it is possible that the Eurozone’s third largest economy could strive for meagre growth by the end of the year. In Germany Factory Orders printed at 4.3% in June, massively outperforming predictions of just 0.3%. Demand for German products within the currency bloc improved by a mammoth 10% during the month, suggesting that the embattled 17-nation bloc is slowly finding its feet as the shock of the debt crisis continues to wane. However, it is important to point out that the leviathan of a print was heavily influenced by an order of 466 planes for the Paris Air Show. US Dollar The Pound appreciated by around 0.3 cents yesterday as the swell of encouraging UK data releases boosted demand for the UK currency. With July’s Retail Sales performance topping that of any month preceding it since 2006 and House Prices rising at the fastest pace since August 2010 Sterling was relatively well bought yesterday. GBP/USD would likely have strengthened further if traders weren’t worried that this morning’s BoE statement could implicate the Pound with additional or extended monetary easing. Most market-players are betting on some form of forward guidance from the UK Central Bank, which carries the potential to devalue the Pound, but it is also possible that a less aggressive approach will be witnessed and this could send Sterling through significant resistance levels at 1.5380. Canadian Dollar The Canadian Dollar declined by over half a cent against the Pound yesterday as decent UK data supported the Pound and negative domestic data damaged the ‘Loonie’. The Canadian Dollar ran into some trouble during the afternoon as the latest Trade Balance report, amid a slew of revisions, showed that the Canadian deficit widened from C$303 million to C$469 million from May to June. Australian Dollar The Australian Dollar strengthened by around 0.8 cents yesterday despite the Reserve Bank of Australia announcing a fresh interest rate reduction. The 25 basis point RBA rate cut was largely priced-into the market and subsequently the Central Bank statement was scoured for signs of future developments. It appears that by omitting any comments regarding the rate of ‘inflation providing scope for further easing’, the RBA brightened investors’ opinion of the ‘Aussie’ Dollar, which led to GBP/AUD’s sharp fall. New Zealand Dollar The New Zealand Dollar recovered by around half a cent against Sterling yesterday as the domestic Finance Minister Bill English commented that the local economy will only suffer a small hit from the Fonterra dairy debacle. If you need any further assistance, or require a live dealing quote - please do not hesitate to contact me on 01736 335250 or send an email to info@torfx.com Regards,
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